ITAT Raipur orders deletion of disallowance under section 14A with no interest-bearing funds used.

The ITAT Raipur partially allowed the appeal, ordering the deletion of the disallowance made under section 14A read with rule 8D. The tribunal found that no interest-bearing funds were used for investments to earn exempted income, and no other expenses were incurred for exempted income. The matter was remanded back to the ld. AO for verification of the actual exempted income earned by the assessee. The appeal of the revenue was partly allowed for statistical purposes.

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Issues involved: The appeal is against the order of the ld. CIT(A)-3, Bhopal for the Assessment Year 2013-14. The main issue is whether the deletion of the addition of Rs. 2,57,13,664/- made by the AO u/s 14A r.w.s 8D was justified.

Facts and Proceedings:
- The assessee, a company engaged in manufacturing and sale of various products, was selected for scrutiny under CASS for the year under consideration.
- The ld. AO, after examination, made an addition invoking section 14A of the I.T. Act, 1961.
- The assessee appealed before the ld. CIT(A) who deleted the addition, leading to the current appeal by the revenue before the ITAT.

Controversy and Arguments:
- The main controversy was the reversal of the addition made by the AO u/s 14A read with rule 8D.
- The ld. AR presented facts and case laws to support the contention that no disallowance should have been made under section 14A, as there were sufficient funds available with the assessee to make the investments without using any interest-bearing funds.
- The AR argued that the disallowance made by the ld. AO was rightly deleted by the ld. CIT(A) and should be upheld.

Decision and Rationale:
- The ITAT considered the submissions, case laws, and facts presented.
- It was established that no interest-bearing funds were used for investments to earn exempted income, no other expenses were incurred for exempted income, and an exempt income of Rs. 46,500/- was earned by the assessee.
- The ITAT concluded that the disallowance u/s 14A read with rule 8D was not in accordance with law and ordered its deletion.
- The issue of the actual exempted income earned by the assessee needed verification, and the matter was remanded back to the ld. AO for this purpose.
- The appeal of the revenue was partly allowed for statistical purposes.

Conclusion: The ITAT Raipur partially allowed the appeal, ordering the deletion of the disallowance made under section 14A read with rule 8D, and remanding the issue of verifying the actual exempted income earned by the assessee back to the ld. AO.

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